The recipient of a life insurance policy may not even be aware that they were named in an insurance policy. The owner of the insurance has the right to choose who they want as the beneficiary, but what happens if the beneficiary does not want the insurance payment? Does he or she have the right to refuse?
What is a beneficiary?
A beneficiary is a person named to obtain the death benefits of a policy. These benefits can help the person, whether it is a spouse, a parent or a sibling, to pay for critical financial needs, including funeral expenses, outstanding bills, mortgage payments and support for spouse and children. You have the right to name one, two or more beneficiaries of the life insurance you buy, with the percentage of the death benefit paid to the people you list in the insurance. If one beneficiary decreases, the remainder of the death benefit will be paid to the other beneficiaries.
You have the right to waive your claim for death benefits if you so wish. If you do, the life insurance company will address the problem by paying the other beneficiaries your share of the death benefit. Life insurance policies show your chosen beneficiaries and a conditional beneficiary – the person selected to receive the death benefit if the primary beneficiary is no longer alive.
If you do not accept a death benefit in this situation, the death benefit is paid to the conditional beneficiary. To do this, you must contact the insurance company directly and make them aware that you do not want the death benefit. You must fill out a form. If you are worried about taxation, it is important to know that life insurance payments are not taxable.
Your Beneficiaries: A Life Insurance Review
It is important that you keep your list of beneficiaries up to date. Your life insurance policies should be reviewed annually to ensure that your business is in order. You have the right to change your name recipients and may want to do so for various personal reasons. A child may have a high income and will probably not need as much as another child. A child may have substance abuse problems that you fear may be a problem. In these cases, special arrangements can be made with a policy of paying the death benefit to a trust established in the name of a child.
We can help
A person can reject their share of a death benefit because they have no need for the money and choose to make sure that the benefit goes to the conditional beneficiary or other named beneficiary. Whatever the reason, while you have the right to reject, you do not have the right to choose the recipient of your share of the death benefit. It is determined by the insurance company. Have questions? Contact one of our local agents to help you; we are familiar with all aspects of life insurance and offer guidance on this topic to the community.